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CMA Capitol Insight: Budget Badness

May 07, 2012

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CMA Capitol Insight is a biweekly column by veteran journalist Greg Lucas, reporting on the inner workings of the state Legislature.

Budget Badness

Governor Jerry Brown’s budget plan for the fiscal year beginning July 1, 2012, is based on Californians paying at least $9.4 billion in state income taxes and asking for no more than $2.1 billion in refunds during the month of April. Didn’t happen. So now the hole lawmakers need to fill is several billion dollars bigger. More than $2.2 billion bigger, according to State Controller John Chiang, who kept a running tab of daily tax collections for April – which is by far the state’s biggest month for state income tax payments. Chiang added the payments received by the Franchise Tax Board and those that employers make to the Employment Development Department through withholding for their employees. Then he subtracted the amount of requests for refunds. That equals $7.17 billion, which is just under $2.2 billion less than anticipated. Budget writers were off by $500 million on the volume of requests for revenues, which totaled more than $2.6 billion.

Exactly How Bad Is the Bad Budget Shortfall?

No one fully knows. The Democratic governor will say how bad he thinks it is during what’s called the May Revision, which shows the actual revenues received by the state rather than the estimates made last winter to create the Governor’s January budget proposal. To date anyway, tax receipts aren’t reaching those estimates. Five months ago, the Governor said spending commitments would exceed revenue by $9.2 billion unless he and lawmakers did something about it before June 30, 2013, the end of the fiscal year his budget plan covers. The governor’s Department of Finance showed revenues collected through the beginning of April were $800 million lower than expected, driving the budget gap to more than $10 billion. April’s $2.2 billion less-than-expected pushes the total to more than $12.2 billion. Governor Brown points out that $12.2 billion is far preferable to last year’s $26.6 billion in red ink but, at some point, repeated reductions in state services will eventually cause those services to be ineffectual and incapable of meeting the needs of a state the size of California.

Speaking of California’s Size

The Golden State is now home to 37,679,000 persons as of January 1, according to Governor Brown’s Department of Finance. Los Angeles, the state’s largest city, has a population of 3,825,297 – it grew by nearly 19,000 persons in 2011. San Diego, California’s second largest city, grew by 12,000 persons last year to 1,321,315 residents. Rounding out the top five cities are San José at 971,372; San Francisco at 812,538; and Fresno 505,009. Nearly 9.9 million Californians live in Los Angeles County. Here’s more information from the report.

Where Does the Ax Fall?

Some potential clues of how the governor closes his widening budget gap can be found in his January spending plan. In it, he proposes closing roughly half what at that time was a $9.2 billion hole by a temporary boost in state tax rates for California’s highest earners and a four-year, quarter-cent sales tax increase, which all Californians will pay. If voters don’t approve the tax increase, Brown offers a list of additional cuts. Chief among them is reducing state support for public schools by $4.8 billion – the equivalent of three weeks of instruction. Courts, already reeling from a $350 million reduction this year, would take an additional $125 million hit, the equivalent of closing courts three days each month. There would also be additional $200 million in reductions each to the University of California and the California State University system. Brown’s budget last year cut each by $500 million and another $100 million each in December when – sound familiar? – revenues didn’t reach expected collections. That doesn’t include $875 million in cost savings Brown seeks in Medi-Cal even if his tax increase wins at the ballot.

The Silver Lining – Such as it Is

Without enough cash to cover existing costs, it’s far more difficult to approve new legislation increasing state spending. The deadline to move measures with a price tag to the Senate and the Assembly’s Appropriations committees recently passed, and the agendas of the two committees are starting to expand. This week, for instance, Senate Appropriations has 101 bills on its agenda, and the number of bills to be heard each week will get longer before it gets shorter. Both Senate and Assembly Appropriations employ a “suspense file,” in which bills with a cost of more than $250,000 are held and then considered en masse in light of what, if any, revenues are available. Often bills with a price tag are pared down in scope so they cost the state far less – or nothing. For example, a bill that now creates a statewide program requiring mattress makers to pick up used mattresses free of charge and see that they are recycled to the “maximum extent feasible” might simply become a study of the environmental degradation wrought by illegally dumped mattresses.

Naming Names

Recently, lawmakers swatted down an attempt by one of their own to prevent them from passing resolutions naming interchanges, freeways, highways, tunnels, rest areas and other parts of the state’s transportation system. Opponents of the bill struggled to find reasons for voting against it that sounded like important public policy concerns rather than losing a convenient – and visible – way to honor civic leaders, law enforcement, crime victims and points of interest in their district. It’s not a new phenomenon; naming resolutions have been approved for decades. In fact, when the first freeways were built, they had names – numbers were added later to avoid motorist confusion. In Los Angeles, for example, the freeways extended out from the civic center like spokes and were named for their terminus: Glendale, Hollywood, Pasadena, Pomona, Santa Ana, Santa Monica, San Diego, Ventura. In 1962, the state Senate expressed concern over the proliferation of naming and asked for a study by Caltrans. In 1964, the Senate asked for further study. Three years later, Caltrans said the job of naming parts of the transportation system should be given to the Highway commission, which is now called the state Transportation Commission – the same entity that would have been given exclusive naming rights under the bill voted down by legislators 45 years later.

Who Are These Guys?

The bulk of the parts of the system that have names are memorials to local law enforcement, California Highway Patrol officers, military personnel and Caltrans workers killed in the line of duty. Some former lawmakers have bits of highway named after them, usually in recognition of their efforts to get that part of the system built. Two physicians in the state’s northwestern-most counties have been honored, according to a 236-page Caltrans report issued in January 2011 cataloguing the more than 700 parts of the state’s transportation system that have been named. The Van Duzen Bridge between Fortuna and Scotia in the southern part of Humboldt County is named after Dr. Harold Comfort. Comfort moved to Fortuna in 1926 and practiced in the area out of an office in the front rooms of his house. Like many small town docs, it was long hours, seven-day workweeks and house calls to hell and gone. He’s credited with delivering 5,000 babies during his career, which ended with his death in 1954. The bridge named after him is the one he passed over repeatedly traveling south from Fortuna to Scotia to the hospital where he performed most of his surgeries. Farther north is the E. M. Fine Bridge over the Smith River in Del Norte County. After an internship at Lane Hospital, which later became the start of the Stanford Medical Center, Dr. Fine moved to Crescent City in 1899. There were no paved roads in the county. Fine was on call 24 hours a day, seven days a week. He usually used a borrowed horse and buggy to make house and farm calls, but in emergencies employed a saddle horse for greater speed. In 1905, he bought a crank-started red Ford roadster that proved to be notoriously temperamental. The doctor operated on the vehicle’s internal mechanics routinely. Dr. Fine charged according to difficulty. Minor problems, easily handled, were freebies. A house call from Crescent City to Klamath was $25. Dr. Fine purchased a well-to-do family’s home and converted it into Crescent City’s first hospital. He died in 1939.